SYDNEY
Australia's housing market fell 3.1 percent in the past three months, with upper-quartile values in Sydney and Melbourne down more than 10 percent from peaks, according to Cotality analysis. The downturn reflects dual pressure: rising interest rates and May budget reforms that eliminated negative gearing for most new investors.
The price collapse is starkly bifurcated. In Sydney, homes valued at $2.1 million and above—typically speculative holdings—are bearing the brunt. Melbourne's upper quartile ($1.2 million and above) and Canberra's ($1.2 million and above) show similar damage. By contrast, Sydney's lower-quartile homes have fallen less than 6 percent from peaks; Melbourne's lower quartile, less than 4 percent. Perth, Adelaide, and Brisbane posted more modest declines.
"The largest declines are concentrated among expensive homes, which were the first to turn and continue to record the greatest cumulative falls," said Gerard Burg, head of research at Cotality.
The composition of active buyers has inverted. Investors—traditionally the marginal price-setter in Australia's housing market—have largely exited. First-time buyers and owner-occupiers, previously priced out, are now active, particularly in segments below government scheme caps: $1.5 million in Sydney, $950,000 in Melbourne, and $1 million in Brisbane.
"The market is showing signs of stabilization," said Peter Esho, chief executive at 13x. "A reduction in budget noise and an increase in buyers who were previously on the sidelines perceiving opportunity are driving this shift."
Government schemes for first home buyers offering 5 percent deposit options are drawing strong participation. The caps effectively exclude upper-quartile stock, concentrating new buyer demand in the segments holding value.
